Crypto Bank Silvergate Capital To Shut Down (axios.com) 13
Silvergate Capital, the publicly-traded parent of Silvergate Bank, said Wednesday that it would liquidate the bank, just days after saying future operations would be uncertain. Axios reports: "In light of recent industry and regulatory developments, Silvergate believes that an orderly wind down of Bank operations and a voluntary liquidation of the Bank is the best path forward," a press statement reads. While the bank's demise had everything to do with its choice of industry -- FTX's collapse sent the entire crypto world in hunt of liquidity, causing a run on deposits at Silvergate -- balance-sheet problems in today's high-rate environment is not a crypto bank-specific stumbling block. Silvergate's troubles were in plain sight in that respect.
When customers pulled more than $8 billion from its platform late last year, the bank got a $4.3 billion assist in home loan advances from the Federal Home Loan Bank (FHLB). It effectively benefited from an implicit government backstop. But between having to pay those loans back right away and other investment losses, its outlook was grim, even before the company filed a registration statement saying so.
The overwhelming majority of bank liquidations are announced on a Friday afternoon, to give the FDIC a full weekend to shore up the institution and reassure depositors before the next business day. The fact this happened on a Wednesday is an indication of just how quickly Silvergate imploded. "Crypto exchanges, platforms and stablecoin issuers at least have the excuse that they don't have direct access to central bank liquidity," Frances Coppola, an economist and writer of blog Coppola Comment, said in a recent post about the bank. "But Silvergate does -- and yet it didn't use it." That would appear to be an oversight for the bank, but also its regulator.
When customers pulled more than $8 billion from its platform late last year, the bank got a $4.3 billion assist in home loan advances from the Federal Home Loan Bank (FHLB). It effectively benefited from an implicit government backstop. But between having to pay those loans back right away and other investment losses, its outlook was grim, even before the company filed a registration statement saying so.
The overwhelming majority of bank liquidations are announced on a Friday afternoon, to give the FDIC a full weekend to shore up the institution and reassure depositors before the next business day. The fact this happened on a Wednesday is an indication of just how quickly Silvergate imploded. "Crypto exchanges, platforms and stablecoin issuers at least have the excuse that they don't have direct access to central bank liquidity," Frances Coppola, an economist and writer of blog Coppola Comment, said in a recent post about the bank. "But Silvergate does -- and yet it didn't use it." That would appear to be an oversight for the bank, but also its regulator.
Crypto = scam (Score:3)
Re:Crypto = scam (Score:4, Insightful)
Re:Crypto = scam (Score:5, Informative)
Trouble is they are a real bank, which means that the taxpayer is on the hook for any deposits that they cannot repay.
Only for accounts that meet FDIC coverage requirements. Cryptocurrencies are specifically listed as not covered [fdic.gov]. Customers who had fiat currency in a regular deposit account will be made whole (well, up to $250k, at least), but the people who lost their crypto will be told to go pound sand.
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Trouble is they are a real bank, which means that the taxpayer is on the hook for any deposits that they cannot repay.
Not true. After the 2008 nightmare, the Dodd-Frank Act was passed which gives banks the authority to convert depositors' money into shares of stock in the bank. This is called a "bail-in" (as opposed to "bail-out") and is the new reality.
Notwithstanding FDIC insurance which in theory protects the first $250,000 of any single account balance, the rest is subject to "conversion" to bank stock. Now who out there wants their cash deposits converted to stock in a failed bank? (raise your hands).
This a
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but who knows the outcome in the event of failure of very large institutions and/or systemic failure?
This is the government we're talking about. Economic consequences be damned, they can always just print more money.
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Indeed. May also be the reason to shut them down: Make it harder for the investigators to figure out who needs to go to prison. Analysing data from a complex, non-running IT landscape and with the experts long gone is pretty much a nightmare.
Hey Hey Hey (Score:2, Informative)
Another One Bites The Dust
Thank you Queen for your contributions to Rock.
die, cryptofucks, die (Score:1)
Another one bites the dust (Score:1)
Surprisingly, there seem to still be some left. And plenty of fools.
09 banks were 'too big to fail' (Score:1)
Lol, 2023 now bailing out risky as fk crypto with hard earned taxpayer dollars. What else can you do but laugh.
It was scammers scamming scammers, but now all us smart people that avoided that trap are caught in it anyways.
Oh no! (Score:1)